Do You Need A Closed Bridging Loan?

Short term finance secured against property are known as Bridging Loans and are generally offered on a non-status basis i.e. they are granted against the open market value of property less any outstanding mortgage and not your previous credit history.

Bridging Loans come in two varieties and can be offered as "open ended" or "closed". Put simply, an open bridge loan is where there is no pre arranged exit for the lender. A closed bridge loan, on which we concentrate below, is where there is a guaranteed exit for the lender as longer term funding is already agreed. These loans are usually much shorter than an "open bridge", however funding up to 12 months should not be a problem.

The situations that qualify as a "closed bridge" and give a bridging lender their guaranteed exit are as follows:-

A one day Bridging Loan

This is where a residential property has been bought below market value, usually for Buy to Let purposes and by inserting a loan for just a few short hours, the purchaser can immediately re-mortgage at full open market value. Both transactions complete on the same day, the property purchase completes with the bridge finance and the re-mortgage takes place straight after thereby repaying the original lender. This low risk transaction is reflected in the cost of the finance.

Fast Bridging Loans to complete an Auction purchase

A property has been purchased at an auction, a mortgage offer is in place but the actual mortgage lender cannot complete in time. The bridging loan ensures the property is secured and is redeemed on mortgage completion.

Bridging Loans to complete a residential purchase

Where exchange of contracts has taken place on the the sale of your current property, a closed bridging loan can be used to secure the purchase your new property, for instance where there is a danger that the property maybe sold to someone else!

To secure your next site for development

Your current development is nearly complete, all units have been sold and contracts exchanged, but all your cash is tied up, you need cash for a deposit to exchange or complete the purchase of your next site to minimise delay between developments. The solution? A short term bridging loan!